With the Economy improving why aren’t Millennials buying RE?

Today’s Millennials may make up the largest and best-educated generation in American history, but coming of age during the Great Recession can still be a daunting task – especially when it comes to buying your first home. Many of today’s college grads have been plagued by a lack of available jobs, forcing many to pursue additional degrees or move back home with their families, so the idea of buying a home can seem like an impossible goal for some. But not all hope is lost – over the last three years we’ve seen significant improvements in the economy and job growth, offering optimism that millennials, adults under 35 years old, will soon be able to fill the void in today’s housing market.

Millennial-generation home buyers have not emerged in anticipated numbers, in part because they are staying single or getting married and having children later in life. Additionally, millennials are staying in their childhood bedrooms longer. From 2000 to 2005, the share of young adults living with parents remained at about 27%.

The same story holds for older members of the generation, those 25 to 34, according to an analysis by Jed Kolko, an economist formerly with Trulia, the online real estate business. “Since young people haven’t started moving out of their parents’ homes yet, a boom in millennial homeownership still looks years away,” he said.

Historically, 4 of 10 houses sold went to first-time buyers, but that is closer to 30% today. That percentage is even lower for the new-home market. High levels of student debt may be hurting home purchases, according to researchers at the Federal Reserve. That may be true even though younger adults aren’t as strapped financially as a few years ago. Mortgage interest rates have slid back to near-record lows, averaging 3.6% for a 30-year loan this week, amid global economic turbulence.

Fortunately, home builders say they haven’t given up on young adults and other entry-level buyers. The association is forecasting 1.25 million housing starts this year, that’s up from 1.1 million units last year. At the same time, it’s not clear whether there will be enough affordable houses to meet the needs of young adults. Seniors are living together longer and increasingly delaying downsizing, said Jordan Rappaport, a senior economist at the Federal Reserve Bank of Kansas City. This could slow the apartment market and also free up houses in the suburbs for young families.

Smoke of Realtor.com says his surveys show that the No. 1 deterrent for potential young home buyers has to do with lack of affordable dwellings for sale— and he doesn’t see that picture changing any time soon. Experts who have studied the buying patterns of young adults say their absence from the home-buying market does not mean a lack of interest, rather the lack of supply in the housing market results in a limited demand.

Do you think millennials will create more demand in the housing market? We’d like to hear your thoughts!

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